Understanding the Rights and Obligations of Creditors and Debtors in South Africa

 Introduction

In South Africa, the National Credit Act (NCA) serves as a guiding framework for creditors and debtors. It regulates how credit information is accessed, ensuring that consumer rights are upheld while also allowing creditors to manage risk and recover debt. This article explores the rights and obligations of creditors and debtors, including when a creditor can conduct a credit check, when it is unnecessary to obtain permission, the process of listing a debtor as a bad payer, and what steps an aggrieved debtor can take.

Rights and Obligations of Creditors and Debtors

The NCA ensures that both creditors and debtors operate within a regulated environment, protecting consumer information and preventing unfair practices.

Obligations of Creditors

Creditors have the following obligations under the NCA:

• Obtain Consent for Credit Checks: With some exceptions, a creditor must secure the consumer's explicit consent before conducting a credit check. This ensures that the debtor's personal information is protected.
• Notify Before Listing as a Bad Payer: Creditors must notify debtors 20 business days before listing them as a bad payer with a credit bureau, allowing the debtor time to rectify the situation or dispute the listing.
• Correct or Resolve Disputes: If a debtor challenges their listing, the creditor must work with the credit bureau to correct any inaccuracies.

Rights of Debtors

Debtors are entitled to several protections under the NCA, including:

• Right to Consent: A debtor's credit information cannot be accessed without their explicit consent, except in limited circumstances.
• Right to Dispute Listings: Debtors can challenge listings with credit bureaus if they believe the information is incorrect.
• Right to Privacy: A debtor’s financial information cannot be shared or used without their permission unless legal exceptions apply.

 Conducting Credit Checks: Consent and Exceptions

The NCA makes it clear that conducting credit checks without consent is illegal, with a few exceptions that permit creditors to access credit information without prior permission.

When Creditors Can Conduct Credit Checks

In most situations, creditors must obtain consent before running a credit check. The general rule is that consumers must explicitly agree to have their credit information accessed by signing a contract or providing written consent.

Exceptions to Obtaining Consent

There are situations where a creditor or authorized party may access credit information without the debtor’s prior consent. These include:

• Legal Requirements: A court order or legal requirement can compel a credit bureau or creditor to access credit information without consent.
• Debt Collection: If a registered debt collector is acting on behalf of a creditor to recover debts, they may perform a credit check without permission, but this must be done in accordance with the law.
• Fraud Prevention: Credit checks may be conducted without consent in cases where there is a suspicion of fraud, helping creditors assess the risk of fraudulent activity.

These exceptions ensure that creditors can still protect themselves and recover debts, even when consent is not obtained, but they must always act within the confines of the law.

Listing Debtors as Bad Payers

If a debtor defaults on payment, creditors have the right to list the individual or business as a bad payer with credit bureaus. This listing negatively affects the debtor’s credit rating and stays on the record for at least two years.

Steps to List a Debtor

Creditors must follow the process outlined in the NCA before listing a debtor as a bad payer:

• 20-Day Notice: Creditors must provide the debtor with a written notice of their intention to list a default. This notice can be sent via registered mail or email, and the creditor must prove that the notice was received.
• Dispute Option: During the 20-day notice period, the debtor has the right to dispute the listing by challenging the accuracy of the information.
• No Notice for Judgments: If a court judgment has been passed against the debtor, the creditor can list the judgment without providing prior notice.

Default listings have serious consequences, affecting the debtor’s ability to access further credit and possibly impacting employment opportunities.

Rights of an Aggrieved Debtor

A debtor who believes they have been unfairly listed with a credit bureau has several options to rectify the situation.

Steps to Challenge a Listing

• Check Credit Report: If a debtor suspects incorrect information on their credit report, they should first check the accuracy of the report by contacting the credit bureau.
• Lodge a Dispute: If there is an error, the debtor can lodge a dispute with the credit bureau. The bureau must provide a reference number and resolve the dispute within 20 business days.
• Escalate to the Credit Ombud: If the credit bureau fails to correct the mistake or the debtor is dissatisfied with the outcome, they can escalate the issue to the Credit Ombud. The Ombud resolves disputes between consumers and credit bureaus or credit providers.

The Credit Ombud is a free service available to consumers and businesses and can be contacted via phone or their website.

Conclusion

The National Credit Act in South Africa provides a balanced framework to protect both creditors and debtors. Creditors are required to obtain consent for credit checks and notify debtors before listing them as bad payers, while debtors have the right to dispute incorrect listings and seek resolution through the Credit Ombud. By following the guidelines set out in the NCA, both parties can ensure a fair and transparent credit process that respects consumer privacy and upholds legal obligations.